THE STATE Pension (SP), formerly known as the retirement pension, aims to give people a regular income and is based on National Insurance contributions..

The full weekly rates for the basic State Pension are £95.25 for a single person and £57.05 for a wife based on her husband’s contributions.

The other types of State Pension include the Additional State Pension, the Graduated Pension and Over-80s Pension. They are based on National Insurance contributions and the age that you can claim it is 60 for women and 65 for men.

However, the State Pension age for women will increase gradually from 2010, so that by 2020 it will be 65. This alteration will not affect anyone born before the year of 1950. The State Pension age will then increase to 68 for men and women between 2024 and 2046. This will affect anyone who is born after 5 April 1959.

Registered civil partners are now accorded the same rights as married couples in relation to pension rules. In 2010 this will be further equalised, so any regulations that applied to wives only will also apply to husbands and civil partners.

Basic Pension

YOU are entitled to the full rate of Basic Pension if you have paid National Insurance for the majority of your working life. If you’ve not paid enough, you might receive a partial pension. There is a chance you may not receive a pension at all. In this case, married women, divorcees, widows, widowers, former civil partners and surviving civil partners might be able to claim a pension that’s based on their partner’s NI payments. However, if your own pension is more than £57.05 a week, you won’t get any extra pension based on his or her contributions. If you are a married woman under 60 earning less than £64.30 a week, your husband may be able to claim an additional £57.05 for you as a dependant.

When you reach 60, you can claim your own pension based on your and/or your husband’s contributions.

What if I Can’t Get a Full State Pension?

IN THIS case you may be able to claim a weekly minimum pension of £23.81 and a maximum of £95.25 if you reach State Pension age before 6 April 2010 and have 25% or more qualifying years of contributions on your record (see below for further information on qualifying years). If you have less than this then you will not normally be entitled to a pension at all.

The rules will be different if you reach retirement age on or after 6 April 2010, then each qualifying year will entitle you to one-thirteenth of the full amount. Don’t worry if you can’t get a pension, as other state benefits could apply if you are on a low income. Contact your local Citizens Advice Bureau for information.

Pension Predictions

IF YOU are more than 30 days away from pension age, you can check

if you’ve paid enough contributions for a full pension by filling in form BR19, which is available from The Pension Service www.pensionservice.gov.uk. Or you can call the Future Pension Centre on 0845 3000 168. You will need your National Insurance number.

National Insurance (NI) Contributions

SINCE 1975 employees aged 16 or over and under pension age have been required to pay NI contributions. These vary depending on your earnings. Employers also pay NI contributions, even if the employee is over pension age.

The self-employed pay a flat-rate contribution each week towards a Basic Pension. The reduced contributions for married women scheme was introduced in 1948 and abolished in 1977, so some of you may be affected by this. Married women could choose to pay a reduced rate contribution, but this does not count towards Basic Pension.

NI Contributions and Basic State Pension

THERE are two conditions and these depend on working life, lower and upper earning limits and qualifying years. To clarify this terminology:

• Working life is the period on which your contribution is based and is commonly the tax year (6 April to 5 April) in which you were 16 to the end of the year before you reach 60 for women, or 65 for men.
• Lower and upper earnings relate to NI contributions paid as a percentage of someone’s earnings. The lower and upper earnings limits are weekly amounts that are usually increased every year. At the moment the lower limit’s £95 and upper limit £844. Someone who earns less than £110 a week does not pay NI contributions and isn’t building entitlement to the (Basic) Pension. NI will only be paid on earnings above this level although those earning between £90 and £110 a week will be treated as having paid contributions for the purpose of their pension record. People do not pay contributions on earnings over the upper earnings limit.
• A qualifying year is a year (6 April to 5 April) in which enough contributions have been paid towards a pension. Since 1978, this has been a year in which you have paid (or are treated as having paid) contributions on earnings of at least 52 times the lower earnings limit. Between 6 April 1975 and 5 April 1978 the level was 50 times the weekly lower earnings limit. Before 1975, people paid a weekly stamp. All stamps paid or credited are added up and divided by 50, rounding up any left over, to give the number of qualifying years.

This brings us to the first condition:

First condition

TO qualify for a Basic Pension, you should have paid a certain number of contributions (as opposed to receiving credits). So, after April 1975, you should have paid or been treated as having paid contributions in one tax year on at least 52 times the lower earnings limit or 50 times the limit during the period 6 April 1975 to 5 April 1978. Before this you should’ve paid at least 50 flat-rate contributions.

Second condition

TO qualify for a full Basic Pension, about nine out of every ten years of your working life need to be qualifying years. If you don’t have enough qualifying years, you may get a reduced pension or none at all.

If you’ve not been able to work due to unemployment, illness or caring duties, your contribution record may be protected through credits or Home Responsibilities Protection.

NI credits

YOU will get a credit instead of an NI contribution for every week you are jobless and registered for Jobseeker’s Allowance, not able to work through disability or sickness, or not able to work because you’re a carer receiving carer’s allowance. Men between 60–64 who aren’t paying NI contributions receive credits, even if they’re not poorly, or signing on. But they receive no credits if they reside abroad for at least six months of the tax year.

HRP (Home Responsibilities Protection)

THIS protects the pension rights of someone caring for a child or a poorly or disabled person. It has only applied since 1978. A widow or married woman cannot get Home Responsibilities Protection for any tax year in which she was paying reduced-rate NI contributions.

HRP can usually only be given if you meet certain conditions applied to you for a full tax year.

The conditions include getting Child Benefit (for child under 16); getting Income Support so don’t need to sign up for Jobseeker’s Allowance; caring for someone getting Disability Living Allowance for at least 35 hours a week or Attendance Allowance, you’re a foster parent (from 2003/04 onwards). If you qualify under the last two conditions you must make a claim for Home Responsibilities Protection. HRP makes qualifying for a full pension much easier, as it cuts the amount of qualifying years you require, but the qualifying years cannot be reduced below 20.

Late and Voluntary Contributions

YOU may pay voluntary contributions to preserve your pension record.

Contact the National Insurance Deficiency Notice helpline on 0845 915 5996. There are time limits for paying voluntary contributions. They have to be paid by the end of the sixth tax year following the one where they were due. But seek expert advice before paying any voluntary contributions as you could lose means-tested benefits such as Pension Credit as a result.

Additional Voluntary NI Contributions

YOU can make additional voluntary NI contributions to plug payment gaps. These AVCs will allow you to buy back up to six years of NI contributions. The missing years you wish to make up can stretch back to 1975/76. If you feel you need to make AVCs, get a pension forecast from The Pension Service to check whether you’ve any gaps in your contributions record. Then get advice from the Citizens Advice Bureau as to whether making AVCs is the right course of action for you. It may reduce your right to means-tested benefits.

Graduated Pension

THE Graduated Pension is based on graduated contributions paid on earnings between 1961 and 1975. You will get it when you claim your Basic Pension but it can also be paid at pension age even if you don’t qualify for a Basic Pension. The amount depends on your earnings and is often small. A widow is allowed to inherit 50% her late husband’s Graduated Pension and this applies to widowers or civil partners but only if they too were of pension age when their partner died.

Additional State Pension

THE pension you receive may also include some Additional State Pension (ASP), which started in April 1978. From then until April 2002 this ASP was built up under the State Earnings-Related Pension Scheme (SERPS). But from April 2002 the State Second Pension (S2P) has replaced SERPS. This means that people who retire in the future may receive money from both schemes. ASP is usually related to earnings, although under the new State Second Pension, some carers and disabled people who are not earning a wage will also be credited.

Workers earning more than the lower earnings limit pay into the

Additional State Pension unless they opt out and contribute to an occupational or personal pension instead. You are eligible for the ASP if you are self-employed, paying the reduced married woman’s contributions or earning below the lower earnings limit.

The ASP formula now provides a pension based on 20% of earnings between the lower and upper earnings limit.

The State Second Pension (S2P)

SERPS was replaced by the State Second Pension (S2P) for contributions made from April 2002. It is still an earnings-related scheme but it also gives extra pension to some carers, disabled people and low-paid workers. For the 2009/10 tax year workers with annual earnings of at least £4,940 but less than £13,900 will be credited into the S2P as though they have earnings of £13,900. You can opt out and join an occupational/works pension or a personal or stakeholder pension. Anyone with a personal or stakeholder pension who earned below £13,900 in the 2008/09 tax year should have received a top-up of the Additional State Pension irrespective of whether or not they are contracted out. If you are in an occupational pension scheme earning between £4,940 and £31,800 you should receive a top-up of the Additional State Pension.

Pensions for Widows, Widowers and Civil Partners

LIKE other women, a widow receives her pension at 60. If she is a pensioner when she is widowed she can inherit all or some of her husband’s Additional State Pension and add it to her own, as long as it does need exceed the limit. The amount of SERPS a widow can inherit depends on when her husband dies and his age. If he died by 5 October 2002, she will have inherited the full amount. If he was already 65 by 5 October but dies after that date she will also inherit the full amount. However, those who hit pension age from 6 October 2002 to 5 October 2010, can pass on between 60% and 90% of their SERPS. The surviving partner of someone who reaches pension age on or after 6 October 2010 will only be able to inherit half of their partner’s SERPS. The same regulations apply for widowers and surviving civil partners. If a man was widowed on or after 8 April 2001, in some circumstances he may be able to inherit his wife’s SERPS if he is under pension age when she dies. The maximum amount of State Second Pension (S2P) that a widow, widower or surviving civil partner will be able to inherit is half.

Working Past Pension Age

WHEN you hit pension age you can take your State Pension even if you are still working. You can also defer or postpone taking it so that you can get a higher pension or, alternatively, a lump-sum payment at a later date. The State Pension, including any Additional Pension or Graduated Pension, is taxable, so if you are working and paying tax, your tax code will be adjusted to take into account the extra amount of pension money you get. The good news if that you don’t have to pay NI contributions, but you must get an age exemption certificate, which is available from HMRC National Insurance Contributions Office on 0845 302 1479, to give to your employer who will still have to pay contributions for you.

Postponing Your Pension

IF YOU deferred your State Pension for at least seven weeks before April 2005, then for that period it was increased by about 7.5% for each year of deferment. So someone who put off drawing their pension for 5 years will have seen it rise by about 37.5%. Under the rules from 6 April 2005, your pension will be increased by about 10.4% for each year you do not take it. But instead of receiving a higher weekly pension, you can choose to have a lump-sum payment. You do not have to be working to defer your pension and the Basic, Additional and Graduated Pension are all increased in the same way. There is no time limit to how long you can defer your pension.

Should I Defer or Draw?

YOUR pension is taxable and is also taken into account for benefits such as Pension Credit, Housing Benefit and Council Tax Benefit.

If you take an increased pension after deferment, this will count as part of your taxable income and may limit the amount of any benefits you receive. However, the lump-sum payment from April 2006 will be ignored if you claim Pension Credit, Housing Benefit or Council Tax Benefit.

The lump sum will be taxed at the rate you are currently paying

Income Tax. Deciding whether to defer or draw can be influenced by inflation, your Income Tax bracket, your life expectancy and whether you might be entitled to benefits.

Over 80s

THIS is a non-contributory pension of £57.05 for people aged 80 or over who don’t qualify for a State Pension. If you have a small State Pension of less than £57.05 a week, the Over-80s Pension will be paid to top your pension up to this level. To qualify you obviously have to be aged at least 80 and living in the UK when you claim it. You must also have lived in the UK for 10 years or more in any 20-year period after your 60th birthday. But, if you have lived in another EU country, this may also count.

Claiming the Pension

THE Pension Service in the Department for Work and Pensions (DWP) is responsible for paying State Pensions. A claim form should be sent to you about four months before the day you reach the pension age. When you receive this you can call the Pension Service on 0845 300 1084 and make a claim over the phone or ask them for a claim form. They will give you details of how much your pension will be.

How Does My Pension Get Paid?

MOST now receive their pension via Direct Payment into a bank or Post Office account. You can get your pension paid weekly in advance, or every four weeks or in arrears. The alternative is a weekly cheque in the post. You can sign the back of the cheques to allow someone else to collect your pension at the Post Office.

Changes on the Way

THE Pension Act 2007 will affect people reaching State Pension age

from April 2010. People will be able to get the full Basic Pension if they have 30 years of contributions and/or credits. For more details contact the Pension Service.

From 2012 at the earliest and by 2015 at the latest, the annual increase in the Basic Pension will be linked to average earnings

For more on the future of pensions visit www.dwp.gov.uk/pensionsreform

Contacts List

Pension Service: 0845 60 60 265, www.thepensionservice.gov.uk

Citizens Advice Bureau: 020 7833 2181, www.adviceguide.org.uk

Benefit Enquiry Line: 0800 88 22 00

Disability and Carers Service: 0845 7 12 34 56, www.dwp.gov.uk/lifeevent/benefits/dcs/

Carers UK: 0808 808 7777 (free call), www.carersuk.org

*Please note the details published on this page are targeted at people aged 50 or more and refers to the situation in England.

**Also, please note that the information included here may change from time to time, so please take legal advice if you are in any doubt.